Government should follow generally accepted accounting principles

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VICTORIA: The Office of the Auditor General of British Columbia has released a report explaining its qualified audit opinion on government’s 2018-19 summary financial statements.

Auditor general Carol Bellringer’s audit opinion states that the summary financial statements present government’s financial performance fairly, except for one qualification or concern about an error in the statements. The overall impact of the qualification is that government’s reported surplus for the year should have been $7.2 billion rather than $1.5 billion.

The office continues to differ with government on how it records revenue that it receives primarily from the federal government. Government does not record this revenue according to independent accounting standards. Instead, government records the revenues over a much longer period than the standards allow, meaning these revenues have been under-reported and cloud the Province’s true financial position.

As of March 31, 2019, government has deferred $5.7 billion in revenue over the years. To correct its financial statements, government should have recorded the $5.7 billion as revenue for a total reported surplus of $7.2 billion.

This year, the office removed its qualification on rate-regulated accounting because in November 2018, government repealed a regulation that had stopped BC Hydro from following generally accepted accounting principles. Government also provided new direction that allows the British Columbia Utilities Commission (BCUC), the regulator for BC Hydro, to set rates and have greater oversight of BC Hydro as it is intended to. BC Hydro also wrote off $1 billion in rate-smoothing regulatory assets.

“This is a significant step forward,” said Bellringer. “We’re encouraged by government’s changes and its commitment to restore the authority of BCUC, as well as the accounting changes at BC Hydro, so we’ve removed the qualification on rate-regulated accounting for this year.”

The full report is available on the Office of the Auditor General website: www.bcauditor.com